If you are a parent to a young child, it's essential to start thinking about saving for their future. You don't need much money to start a nest egg for your child. You can even start with as little as a few dollars a month. You have many years to build up that nest egg with your child so young.
So, what are the practical ways that you can use to start building a nest egg for a child under the age of six years? We have listed five ways to get you started on your journey to saving for your young child.
Nest egg contributions on a regular basis
A nest egg is a considerable amount of money saved to be used in the future. You can always build on this amount right from the beginning. As mentioned at the start of the article, new parents can start with as little as possible and then increase the amount as they go along. The main thing is to ensure that money is consistently saved regularly. For example, whether it is every month, bi-weekly, or even every quarter, a considerable amount of money should be reserved for the nest egg.
Below are a few ways parents can prioritize saving for their child's nest egg:
Arrange a standing order for a set amount of money to put aside monthly.
Make it part of your budget to save that money every month.
During tough times, reduce the amount of money you set aside, but keep on saving.
Parents should remember that the key to keeping the nest egg savings ongoing is to keep saving through the tough times. Recent research revealed that many parents save money for their children at a young age, but by the time the child reaches high school age, only 54% continue to make the savings contributions.
With markets crashing and redundancies occurring whenever there is a recession, it is no wonder some parents stop saving for their children altogether. However, this doesn't have to be the case; saving something, no matter how small, will go a long way to help your child in the future.
It is never too early to start investing money on behalf of your child. For example, you can set up a custodial brokerage account for your child and help them select an investment that will serve them in the future. Any amount you invest for your young child will not be taxable. They can access it when they turn eighteen or twenty-one (depending on the state law). Before this age, you can invest money on behalf of your child tax-free.
Consider a kids' investing app
Nowadays, children can use many interesting apps to learn something new. For example, investment apps for minors are an excellent way for kids to learn about money management. The way a lot of these accounts work is they’re actually custodial investment accounts. Parents help their children to set it up, and they also approve all transactions their kids make. This is coupled with these apps delivering educational content to help parents teach their kids about money, investing, saving, and more. Parents can research the best apps for kids to learn critical financial skills. By googling the best app for kids to learn about investing, parents can access many apps that will teach their young kids key financial fundamentals.
Look around for the best interest rates
Parents that save money for their kids can get a good deal by shopping around for the banks with the best interest rates. When there is a recession, the banks will increase the interest rates. In times like this, money being saved will generate a higher return. So look around at the bank rates and use comparison sites to compare the different rates you will get for saving over some time – then choose the one with the best one.
Open a savings account
As soon as you give birth to your newborn, you can open a savings account in your child's name and start saving on their behalf. A savings account will go a long way to keep you accountable, so you can keep building on the money over time.
A savings account for children might give you many options – such as the following:
A saving account that money can't be withdrawn from until the child reaches a certain age.
A savings account that allows parents to withdraw money only a set number of times.
A tax-free saving bank account.
Savings account for kids that offers several freebies (e.g., a free piggy bank).
In closing, having money aside for your young child is essential. Building a nest egg doesn't have to be a daunting task; any parent can save as much or as little as they can afford for their young child. Parents can use many methods to save a nest egg for their young child, including investing or saving money in a high-interest savings account. During a recession, many parents give up and stop saving a nest egg for their children, but they don't have to. Instead, they could put aside a smaller amount to keep the savings going.